HEATHER ALPER VS. JOSEPH WOLFSON (C-000008-18, ATLANTIC COUNTY AND STATEWIDE) ( 2019 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-5874-17T2
HEATHER ALPER and
LUCAS ALPER, a minor,
Plaintiffs-Respondents,
v.
JOSEPH WOLFSON, BETTY
SIMON, and BETTY SIMON
TRUSTEE, LLC,
Defendants-Appellants.
____________________________
Submitted October 28, 2019 – Decided December 18, 2019
Before Judges Fasciale, Moynihan and Mitterhoff.
On appeal from the Superior Court of New Jersey,
Chancery Division, Atlantic County, Docket No. C-
000008-18.
Jacobs & Barbone, PA, attorneys for appellants (Edwin
J. Jacobs, Jr., and Joel Solomon Juffe, on the briefs).
Jeffrey B. Saper, attorney for respondents.
PER CURIAM
Defendants Joseph Wolfson, Betty Simon, and Betty Simon Trustee, LLC
(BST) appeal the trial judge's July 23, 2018 order denying their motion for
attorney's fees and sanctions under N.J.S.A. 2A:15-59.1 and Rule 1:4-8. In the
underlying action, plaintiffs Heather Alper and Lucas Alper filed a complaint
against defendants, alleging that Wolfson wrongfully removed funds from
various 529 accounts established by Simon for plaintiffs' benefit. Believing the
complaint was frivolous, defendants requested several times that plaintiffs
withdraw their complaint. Judge Michael Blee ultimately dismissed plaintiffs'
complaint due to a lack of standing. However, the judge denied defendants'
motion for attorney's fees and sanctions. Having reviewed the record, and in
light of the applicable law, we affirm the denial of defendants' motion for
attorney's fees and costs.
We recite the relevant facts from the record. During 2005, Simon and her
husband (now deceased) established a Utah Educational Savings Plan (UESP)
account1 for the benefit of their granddaughter, Heather Alper. They also
established a non-UESP account for their grandson, Lucas Alper, which
operated in the same manner as the UESP account. Simon was the owner of
1
A "UESP is a 529 plan . . . designed . . . to encourage saving for the future
qualified higher education expenses of a beneficiary."
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both accounts, so any decisions concerning the accounts, including making
withdrawals, required her authorization.
In 2015, before the current action, two of Simon's other granddaughters,
Farah Zell Burns and Sandra Zell Neustadter, filed a complaint on behalf of their
children against Wolfson and BST, two of the defendants in the current matter.
Complaint, Burns v. Wolfson, No. ATL-C-17-15 (Ch. Div. Mar. 11, 2015). The
Burns plaintiffs alleged that Wolfson fraudulently induced Simon to sign forms
authorizing the withdrawal of funds from their children's UESP accounts and,
without authorization, deposited the funds first into Simon's personal account
and then into BST's account. Simon owned the UESP accounts when the alleged
fraud occurred. The judge dismissed the Burns complaint with prejudice for
lack of standing after finding that Simon had absolute discretion over the UESP
accounts. The judge was unable "to find sufficient facts or even cognizable law
that [would] allow[] the [c]ourt to adopt a theory of vicarious standing," and he
added that Simon was the proper plaintiff for claims of conversion, fraud, and
unjust enrichment.
Turning to the current action, on January 18, 2018, plaintiffs filed a
similar complaint against defendants. Plaintiffs alleged that Wolfson
fraudulently induced Simon to remove funds from Heather Alper's UESP
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account so he could deposit the funds into BST's account. According to
plaintiffs' complaint, BST was an entity that the Simon family business "used as
a private 'family bank,' receiving revenues and disbursing monies as directed by
. . . Wolfson." Wolfson was BST's chief operating officer and "personally
control[led], and ha[d] controlled, for several years, the finances of [BST],
including, but not limited to, disbursements made by [BST], as well as any and
all litigation pertaining thereto."
Plaintiffs further alleged that Wolfson had "for several years, personally
controlled, and continue[d] to personally control, all of . . . Simon's personal,
financial and business interests" and that he was aware of Simon's "limited
ability to read or understand documents" pertaining to her personal and business
interests. Wolfson would "place documents in front of . . . Simon and show her
where to sign them, without explaining the nature or purpose of those
documents, and . . . Simon would sign said documents without question or
hesitation." Then, he would use the signed withdrawal forms to remove small
amounts not requiring a signature guarantee from Simon and would deposit the
funds into BST's account and classify the transactions as a "loan" to BST. 2 With
2
Neither party has provided a certification from Simon to support or refute any
of these assertions. Accordingly, the record is silent as to Simon's position.
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regard to Lucas Alper's non-UESP account, plaintiffs do not allege the same
scheme, but they claim that the funds in his account were also used as a "loan"
to BST. Plaintiffs claim that on multiple occasions, Simon "denied knowledge
or understanding of many of the transactions executed on her behalf and on
behalf of . . . [BST], by . . . Wolfson."
Plaintiffs further allege that the Simon family business was involved in a
real estate sale, producing almost twelve million dollars, which was intended to
pay off family members' loans to BST. However, plaintiffs assert that their
"loans" were never repaid. Consequently, they filed suit against defendants,
seeking restitution and asserting counts of constructive trust, fraud, conversion ,
and unjust enrichment.
Defendants sent a letter to plaintiffs, claiming that because plaintiffs
lacked standing, their complaint was frivolous, in violation of Rule 1:4-8(a).
Defendants also asserted that plaintiffs' complaint was improper in light of
dismissal of the Burns complaint. Defendants informed plaintiffs that if they
did not withdraw their complaint within twenty-eight days, defendants would
apply for sanctions. When plaintiffs refused to withdraw the complaint,
defendants filed a motion to dismiss.
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The judge granted defendants' motion, dismissing plaintiffs' complaint
with prejudice due to a lack of standing. He found that Simon was the owner of
the accounts, not an account holder as plaintiffs had claimed. As the account
owner, Simon had complete discretion to withdraw and use the funds for any
purpose. The judge also found that the accounts were not inter vivos gifts
because Simon never delivered the funds to plaintiffs and "never surrendered
ownership and dominion over the funds." Because plaintiffs had no possessory
interest in the accounts, they lacked standing to sue for wrongful removal of the
funds. In addition, the judge found that Simon was the proper party to pursue
the claims.
Plaintiffs then filed a motion for reconsideration, asking the judge to
determine whether Simon was competent when she withdrew the funds from
Heather Alper's account and whether Wolfson unduly influenced her.
Defendants sent another letter to plaintiffs, requesting that they withdraw their
frivolous motion. Plaintiffs declined to withdraw the motion, so defendants
opposed it and cross-moved for attorney's fees and sanctions under the frivolous
litigation statute.
On June 8, 2018, the judge denied plaintiffs' motion for reconsideration
with prejudice, reasoning that he had previously found that plaintiffs lacked
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standing, so there was no reason to consider the substance of any further
allegations in the complaint. The judge was "perplexed that the plaintiffs asked
the [c]ourt to consider a claim of mental incapacity" because plaintiffs' only
relevant pleadings amounted to an allegation of undue influence. He also found
it "perplexing . . . that [plaintiffs' attorney] . . . would make a contention that the
[c]ourt overlooked the issue of undue influence when it did not because it
addressed it" by stating that there was no need to further consider plaintiffs'
allegations since plaintiffs lacked standing.
On July 23, 2018, the judge denied defendants' cross-motion for attorney's
fees and sanctions. Although he "was perplexed by the inadequacies of
[p]laintiff's motion," he did not find that plaintiffs acted in bad faith and
"intended to engage in harassing and vexatious litigation." This appeal ensued.
On appeal, defendants argue that the judge erred in denying their motion
for attorney's fees and sanctions under the frivolous litigation statute because he
failed to consider N.J.S.A. 2A:15-59.1(b)(2). Defendants contend that the judge
should have found that plaintiffs knew or should have known that they lacked
standing to pursue their claims because Simon owned the accounts at the time
of the alleged wrongful withdrawals, and defendants informed plaintiffs of this
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issue several times. 3 Defendants further contend that plaintiffs are liable
because they misrepresented facts by referring to Simon as an account holder
and referring to the accounts as gifts. Defendants assert that plaintiffs either
intentionally misstated these facts or failed to conduct a due diligence
investigation, but regardless of the cause, plaintiffs knew or should have known
that they lacked standing to pursue their claims.
We review a denial of an award of attorney's fees and sanctions for
frivolous litigation for an abuse of discretion. Masone v. Levine, 382 N.J. Super.
181, 193 (App. Div. 2005) (citing DeBrango v. Summit Bancorp, 328 N.J.
Super. 219, 229 (App. Div. 2000)). Reversal is warranted if the decision "was
not premised upon consideration of all relevant factors, was based upon
consideration of irrelevant or inappropriate factors, or amounts to a clear error
3
While plaintiffs' allegations would be more convincing if Simon had certified
that they were true, that defendants did not provide any certification from Simon
is equally if not more suspect. The record contains no firsthand account from
Simon as to her position in this litigation. Additionally, we find it concerning
that the same attorney represents both Wolfson and Simon in this action, which
appears to be a conflict of interest. See RPC 1.7(a) ("[A] lawyer shall not
represent a client if the representation involves a concurrent conflict of interest.
A concurrent conflict of interest exists if . . . there is a significant risk that the
representation of one or more clients will be materially limited by the lawyer's
responsibilities to another client[.]").
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in judgment." Ibid. (citing Flagg v. Essex Cty. Prosecutor, 171 N.J. 561, 571
(2002)).
Under the frivolous litigation statute, a judge may award reasonable
attorney's fees and costs to a prevailing party in a civil action "if the judge finds
at any time during the proceedings or upon judgment that a complaint . . . of the
non-prevailing person was frivolous." N.J.S.A. 2A:15-59.1(a)(1). This statute
applies only to the conduct of parties, not their attorneys. McKeown-Brand v.
Trump Castle Hotel & Casino, 132 N.J. 546, 549 (1993). A complaint is
frivolous if
(1) [it] . . . was commenced, used or continued in bad
faith, solely for the purpose of harassment, delay or
malicious injury[,] or
(2) [t]he nonprevailing party knew, or should have
known, that the complaint . . . was without any
reasonable basis in law or equity and could not be
supported by a good faith argument for an extension,
modification or reversal of existing law.
[N.J.S.A. 2A:15-59.1(b).]
"[F]alse allegations of fact [do] not justify the award of counsel fees, unless they
are made in bad faith, 'for the purpose of harassment, delay or malicious injury.'"
McKeown-Brand, 132 N.J. at 561 (quoting N.J.S.A. 2A:15-59.1(b)(1)). If the
non-prevailing party made "an honest attempt to press a perceived, [though] ill-
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founded claim," the judge should not find that they acted in bad faith. Id. at 563.
The prevailing party bears the burden to show that the non-prevailing party acted
in bad faith. Id. at 559.
Under Rule 1:4-8(a), sanctions for frivolous filings may also be available.
An attorney that signs, files, or advocates a pleading or motion certifies, among
other things, that
(1) the paper is not being presented for any improper
purpose, such as to harass or to cause unnecessary delay
or needless increase in the cost of litigation; [and]
(2) the claims . . . therein are warranted by existing law
or by a non-frivolous argument for the extension,
modification, or reversal of existing law or the
establishment of new law.
[R. 1:4-8(a).]
Before applying for sanctions, the moving party must "serve[] written notice and
demand . . . to the attorney . . . who signed or filed the paper objected to." R.
1:4-8(b)(1). The notice must
(i) state that the paper is believed to violate the
provisions of this rule, (ii) set forth the basis for that
belief with specificity, (iii) include a demand that the
paper be withdrawn, and (iv) give notice, except as
otherwise provided herein, that an application for
sanctions will be made within a reasonable time
thereafter if the offending paper is not withdrawn
within [twenty-eight] days of service of the written
demand.
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[R. 1:4-8(b)(1).]
A party seeking to recover attorney's fees under the frivolous litigation statute
must also comply, to the extent practicable, with Rule 1:4-8. Toll Bros., Inc. v.
Township of West Windsor, 190 N.J. 61, 69 (2007) (quoting R. 1:4-8(f)).
The court must strictly interpret the frivolous litigation statute and Rule
1:4-8 against the applicant seeking attorney's fees and/or sanctions. See
LoBiondo v. Schwartz, 199 N.J. 62, 99 (2009) (discussing R. 1:4-8); DeBrango,
328 N.J. Super. at 226 (citing McKeown-Brand, 132 N.J. at 561-62) (discussing
N.J.S.A. 2A:15-59.1). A strict interpretation recognizes "the principle that
citizens should have ready access to . . . the judiciary." Belfer v. Merling, 322
N.J. Super. 124, 144 (App. Div. 1999) (citing Rosenblum v. Borough of Closter,
285 N.J. Super. 230, 239 (App. Div. 1995)). A judge should only award
sanctions for frivolous litigation in exceptional cases. See Iannone v. McHale,
245 N.J. Super. 17, 28 (App. Div. 1990).
To award attorney's fees for frivolous litigation, we have required a
showing of bad faith. See Ferolito v. Park Hill Ass'n, 408 N.J. Super. 401, 410-
11 (App. Div. 2009) (citing McKeown-Brand, 132 N.J. at 549). The frivolous
litigation statute requires a finding that plaintiffs (1) acted in bad faith or (2)
lacked a "reasonable" legal or equitable basis for their claims and "a good faith
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argument for an extension, modification or reversal of existing law." 4 N.J.S.A.
2A:15-59.1(b).
With respect to defendants' contention that plaintiffs acted in bad faith by
filing the complaint and motion for reconsideration, we find that defendants'
argument ignores the substance of plaintiffs' claims. Upon our review of
plaintiffs' complaint, we find that the allegations appear to form the basis for an
undue influence claim. See Pascale v. Pascale, 113 N.J. 20, 30 (1988) (citations
omitted) ("In respect of an inter vivos gift, a presumption of undue influence
arises when the contestant proves that the donee dominated the will of the donor,
or when a confidential relationship exists between donor and donee."). Here,
plaintiffs alleged that Wolfson knew that "Simon had a limited ability to read or
understand documents," and he "would merely place documents in front of . . .
Simon and show her where to sign them, without explaining the nature or
purpose of those documents, and that . . . Simon would sign said documents
without question or any hesitation." Further, plaintiffs alleged that many times,
Simon "denied knowledge or understanding of many of the transactions
4
Similarly, Rule 1:4-8(a)(2) requires a finding that plaintiffs' complaint lacked
"claims . . . warranted by existing law or by a non-frivolous argument for the
extension, modification, or reversal of existing law or the establishment of new
law."
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executed on her behalf and on behalf of . . . [BST], by . . . Wolfson." Plaintiffs'
complaint does not explicitly allege undue influence, but their allegations
suggest it. Namely, plaintiffs explain how Wolfson dominated Simon's will and
consequently was able to withdraw funds on her behalf, while she lacked an
understanding of the effects of the transactions.
Thus, although plaintiffs were the wrong individuals to pursue this action,
we reject defendants' contentions that plaintiffs pursued frivolous litigation
because the complaint and motion for reconsideration did not lack a reasonable
legal basis. See R. 1:4-8(a)(2); N.J.S.A. 2A:15-59.1(b)(2). Accordingly, we
conclude that the judge did not abuse his discretion in denying defendants'
motion for attorney's fees and sanctions.
To the extent we have not specifically addressed any remaining arguments
raised by defendants, we conclude they lack sufficient merit to warrant
discussion in a written opinion. R. 2:11-3(e)(1)(E).
Affirmed.
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